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|In: Industry Commentary|Last Updated:

The Meta Group reports that a staggering 55% to 75% of all CRM projects fail to meet their objectives. Clearly it’s just the latest in a long line of over-hyped technologies.

Or is it? On the average about 70% of all IT-related projects fail to meet their objectives, so CRM’s failure rate, along with the appalling 70% failure rate for ERP implementation projects and the shockingly high 70% failure rate experienced by those implementing supply chain management (SCM) is about as distressing as a 70% failure rate for baseball batters.

Which is to say this is actually good news. Any manager in baseball would be thrilled to have a team batting average of 300, and if CRM and SCM projects are succeeding as well or better than traditional IT projects it’s remarkable. Why? CRM and SCM aren’t like traditional IT projects. They’re the next stage in an ongoing shift in the role of information technology — from solution to enabler.

When I had hair and COBOL was the only programming language used in business, we automated an existing process, and we were done. The new application was the solution.

Enterprise Resource Planning (ERP) systems, in contrast, ship with built-in business processes. They’re more than software, and as a result require far more coordination between IT and business management — something that caught many early ERP implementers off-guard. Businesses usually implement ERP systems to replace obsolete technology and think of the new processes as added baggage, not added value.

SCM and CRM are fundamentally different. Neither is a category of software.

SCM is a business discipline. Its goal (loosely stated) is to maximize the quality of the raw materials used in creating a company’s products while minimizing handling costs. It requires sophisticated manufacturing and distribution processes, along with the cooperation of your suppliers, their suppliers, and the shipping and distribution companies that move stuff from one to another.

CRM is a core business strategy. It refocuses a company around the management of customer relationships, treating them as assets, where ongoing investment yields ongoing returns. It involves personalized marketing and service, mass customization in manufacturing, and sophisticated employees whose good judgment and attitude, assisted by the company’s systems, help turn every customer experience into not just a pleasant interaction, but part of an ongoing relationship between each customer and the business.

CRM is a core business strategy, driving success through the management of customer relationships which become assets, where ongoing investment yields ongoing returns. It involves personalized marketing and service, mass customization in manufacturing, and employees whose good judgment and attitude, assisted by technology, turn every customer experience into not just a pleasant interaction, but part of an ongoing relationship between each customer and the business.

With both SCM and CRM, information technology is just one of many enablers.

And that’s a fundamental change in our relationship with the enterprise.

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|In: Career Management|Last Updated:

Argument by assertion seems to be on the increase.

Following my recent series on outsourcing, which argued against the popular non-core-competency theory (exercise core competencies in-house and outsource everything else), I received quite a few letters presenting the counterargument that you should outsource non-core competencies. Why? Because they aren’t your core competencies, that’s why!

It’s hard to come to grips with logic like that, let alone argue against it. But I’ll give it one more try. The more I try to figure out what “core competency” means, the more murky the whole thing becomes. I’m left with four outsourcing drivers – two positive, two negative:

  • Outsource when the outsourcer can provide the equivalent function for lower cost (or just fire the manager who can’t deliver the function without margins at the same price an outsourcer can deliver it with margins).
  • Outsource when the function being outsourced requires scarce high-value talent (for example, ad agencies).
  • Avoid outsourcing when the cost of changing your mind, also known as the switching cost, is high, as it is with IT.
  • Don’t outsource if your real goal is solving a personnel problem. If you’ve accumulated an inventory of unproductive employees over the years and are really outsourcing the unpleasant task of terminating them, there are far less drastic ways of handling this chore than outsourcing the function.

Nothing is quite this simple, of course, but I can at least understand these four decision factors. Why you’d want to increase the cost or risk of a function because it isn’t a “core competency” — a term whose definition is murky at best — continues to baffle me.

Not only that, but outsourcing doesn’t always solve the problem. Curt Sahakian of the Corporate Partnering Institute (www.corporate-partnering.com), which helps companies create partnership and outsourcing agreements, says many outsourcing deals are structured so badly it’s like drinking seawater when you’re adrift at sea. It isn’t a sustainable solution, and you end up thirstier than when you started.

Sahakian also offers this advice: Since your employers are going to buy their saltwater from someone, why not you? If outsourcing is inevitable, take charge of the situation and suggest a restructuring that turns your existing IT organization into an outsourcing provider, either as an independent or as a joint venture with one of the major outsourcing vendors.

When your choice is whether to be dinner or chef, chef is probably better.

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